Question
Q1. Option Pricing Under LOGNORMAL Distribution Underlying current at $400 with annual return volatility of 30%. There are 28 days b/f expiration. Riskfree rate is
Q1. Option Pricing Under LOGNORMAL Distribution Underlying current at $400 with annual return volatility of 30%. There are 28 days b/f expiration. Riskfree rate is zero. Consider a CALL option with strike at 380$.
Q1a. What is the probability that the CALL will expire ITM
Q1b. What is the average price of the underlying when CALL expires ITM ?
Q1c. What is the average payment for the CALL when it expires ITM?
Q1d. How much should the CALL be priced at today? ?
Q1e. How much of the option price is time value and how much is intrinsic value?
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Lessons In Corporate Finance
Authors: Paul Asquith, Lawrence A. Weiss
2nd Edition
1119537835, 978-1119537830
